Challenges and Opportunities in International Business Management

Running head: INTERNATIONAL BUSINESS MANAGEMENT
January 14
2019

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International Business Management
The word, International business seems to be a tempting and glamorous term for those who
take interest in growing and expanding their business operations worldwide. Today,
international business is a topic debate in the developing economy. The businesses, big or
small are ready to go outside the national boundaries to have broad access to the resources
and market presence across the frontier of a nation (Christiansen and Bryan, 2013).
International business is continuously becoming interesting in the present world because it is
carrying human skills, creativity, raw material, innovation, technology, and different essential
resources to the host country. In the 21st century, the International business is developing very
fast and touching the seashores of all the nations. The reducing number of international
business barriers through maintaining relationships with the government of different nations
has included glory and glamour to the international business (Sankrusme, 2017). The aim of
this paper is to discuss the importance and challenges of expanding business operations
outside the national boundaries. The paper will highlight the role of psychic distance in the
procedure of companies' internationalism. Besides this, it will present a critical review over
selecting different modes of entry for conducting business in the international market. I the
end, the paper will analyze the challenges and opportunities of current instability in the
international trade regime for a company.
1. Challenges for SMEs while expanding internationally
It is deceptive that SME that is small and medium enterprises perform a key part in the
country's economic development. For example, the recent trend of economic development
and fast industrial growth has made Malaysia and Asian countries as the most open world
economies (Muhammad, Char and Yasoa, 2010). The development of international markets

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encourages rivalry and enforces governments to accept policies that are market-oriented, both
internationally and domestically. Advanced technologies have momentously decreased the
information cost and the competencies to contribute to the worldwide economy. In fact, there
is plenty of evidence that proof SME has not just been succeeded in domestic economies, but
that their worldwide existence has grown as well. According to Samad (2007), there are
numerous challenges that SME deals in the globalized environment, for instance from the
struggle to deal with the recession, obstacle from worldwide sourcing, lack of managerial
competencies, lack of financing, difficulty in accessing technology and management, high
regulatory burden, low productivity, and others. According to Teoh & Chong (2008), the
challenges for entrepreneurship are the absence of access to credit and absence of access to
social networks and formal business. Besides this, challenges faced by SMEs while
expanding business operations in the international market are increased worldwide
challenges, new developing technologies, and procedures of production along with increasing
factor costs, which influence the export competitiveness.
Recession
Today, the economic dip is a constant challenge that is experienced by SMEs. In 2007, the
economy of the world experienced numerous unfavorable activities like prices of oil tracked
by the sub-prime credit crisis in the United States of America, which resulted in financial
distress to the market. Many countries are presently reflecting a decreasing economic growth
and increasing costs of production, which specifies that the recession in the worldwide
market, is unavoidable. The common consequence of a recession is decreasing expenditures
by customers, decreasing product demand, reduced production, and increasing
unemployment. Small and medium enterprises are influenced at higher degree particularly
those take part in the supplying and trading of services to other industries.

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In the future, the economic crisis can be avoided by creating a competitive sector of SME that
is capable to participate in international as well as domestic markets. Harvie (2004) claims
that the sector of SME has a vital part to perform in the continued retrieval of the district or
country rising from the business chances created by the reshuffle procedure itself, the effort
towards closer district economic integration, developments in ICT and more precisely the
commercial opportunities arising from the Internet.
Global Sourcing
Liberalization and Globalization have supported in making the resources of business more
transferable and mobile beyond boundaries. Rivalry for resources like capital and material
has enhanced in numerous Asian countries like Malaysia. According to the researchers,
market globalization has highlighted that businesses should learn to work be considering the
world as a single huge market overlooking insincere local and national differences. In the
procedure, globalization endorses technology, knowledge and source transfer, as ever-new
practices of production will be offered. Besides the positive deeds, liberalization damages
native SMEs since they need to contest with inexpensive, innovative incoming international
services for capital and resources. Globalization also generates unprecedented information
and communication technologies. Small and Medium Enterprises should enhance their
competitive abilities by the effective determining in cooperative environments. Hence, SMEs
should take benefit of low-cost labor, advanced technology, flexible logistics, and cheaper
materials (Wright, Westhead and Ucbasaran, 2007). This, in turn, offers synergy to SMEs in
the developing nations for example Malaysia.
Legal problems in Global Business
Considering the international market, Small and Medium Enterprises are experiencing the
absence of legal knowledge. For instance, there is a lack of advancing agencies that can offer

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advice related to legal requirements precisely to SMEs moving towards the international
market. According to Teoh & Chong (2008), the challenges for SMEs is the lack of
experienced management related to rules and regulations of the international market.
Therefore, Small and Medium Enterprises can find restricted access due to unsuitable and
out-dated regulations. In regards to legal and registration incorporation, numerous numbers of
SMEs require to establish its existence in the international market to be noticeable to
consumers. Legal and Registration incorporation necessities differ significantly amongst
nations and are mostly needlessly expensive and complex (Abu Bakar, Mad and Abdul Latif,
2006). It can take longer time duration for SMEs to attain consistent info regarding relevant
regulations and market opportunities for new tool, service, or product. Besides this, there are
some particular controls and requirements enforced by overseas governments.
Lack of Government Support
The state government has to perform a significant role and commitment to SMEs, particularly
in main areas of key growth as well as the accessible support and infrastructure to support
them (SMIDEC, 2007). This type of area is one and only Halal Industry. Numerous of
Malaysian state governments did not try to motivate Halal industry. For instance, Negeri
Sembilan and Melaka state still permitting pig farming without thinking about the Halal
industry on an aggregate basis. With projected data for Halal trade of around USD2.1 trillion,
there is astounding potential for Halal products globally. The state government should
classify this probably because it prepares Malaysia to become foreign Halal hub towards by
2010. Another area of key growth comprises the developing franchise industry and the
present leaning of outsourcing and shared services. Other key growth areas include the
growing franchise industry and the present trend.
Product branding in the International market

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Branding is an effective way of distinguishing services of the business from the competitors
and creating an attractive product for consumers. For instance, Malaysian SMEs do not take
branding as a most important strategy to compete internationally. Fewer efforts and capital
invested in creating well-packed and attractive products, as well as an innovative product
especially for the export market. Businesses can attain a competitive advantage by doing
innovation in the form of a new procedure of production, the new design of the product, or
new approaches to marketing (Foon and Eu-Gene, 2006). SMEs required to be reinforcing
the brand to enhance the positioning in order to grab opportunities in the new market. SMEs
can vigorously distribute its products by franchise if a known brand is established.
2. Role of Psychic Distance in the procedure of Internationalization of Company
Psychic distance is said to be notion for understanding the procedure of how companies take
the decision of entering into international markets and has mostly been considered in global
management areas. The psychic distance comprises culture, industrial development, language
differences, business practices, and education that can result in psychological distress in an
individual (Child, Ng and Wong, 2002). This psychological distress can result in insecurity,
decreasing performance, and efficiency, irritation, and passivity, which can negatively affect
the performance of an expat whilst on their worldwide mission (KUBO and BRAGA, 2013).
Besides this, psychic distance could be a conclusive factor inducing the choice or the nation
in which the business will expand its market.
Psychic Distance Dimensions
The following discussion shows the three important dimensions that make us understand the
concept of psychic distance that is the macro environment, business dimension, and cultural
dimension.